[Price Review] This week, silver prices saw an extreme “roller-coaster” ride. On March 2, driven by the sudden loss of control in the Middle East situation and the escalation of the US-Israel-Iran conflict, international silver prices once opened higher with a gap to around $97/oz, then quickly reversed lower, entering an in the doldrums trend for the week. After the fermentation of the geopolitical risk premium ended, macro factors such as cooling expectations for US Fed interest rate cuts and a stronger US dollar weighed on precious metals prices. In terms of the gold/silver ratio, gold and crude oil lead the gains among commodities; silver’s weekly gain lagged gold’s. The short-term trend in precious metals prices remained unclear, speculative interest declined, and as of March 4, the LBMA gold/silver ratio rebounded to 60x.
[Key Data]
Bearish:
US February ISM Manufacturing PMI (actual): 52.4, above expectations and below the previous reading
US February ADP employment (actual): 63,000, above expectations and the previous reading
US EIA crude oil inventory for the week ended February 27 (actual): 3.475 million barrels, above expectations and the previous reading
Data and macro releases to watch next week include:
On March 6 (Friday), the US is set to release February seasonally adjusted nonfarm payrolls and the unemployment rate. The market expects job gains to slow down sharply to 60,000; Bloomberg Economics even forecasts negative growth due to the cold wave. The unemployment rate is expected to hold steady at 4.3.
Fed Chairman Powell, along with multiple governors and voting members, will speak next week. Attention should be paid to their latest remarks on inflation, the labor market, and the impact of tariff policies.
US-Iran situation: Iran’s Islamic Revolutionary Guard Corps has announced a ban on any vessels passing through the Strait of Hormuz, effectively blocking a route that carries about 20% of global oil shipments. Next week, attention should be paid to whether shipping resumes; Iran has launched missile strikes on 27 US military bases in the Middle East, and the conflict has entered its sixth day. Next week, attention should be paid to whether the conflict spills over to neighboring countries such as Saudi Arabia and the UAE.
[Price Forecast] Next week, silver prices are still expected to be heavily influenced by macro factors. There are no signs of easing in the conflict in the near term. If military frictions continue to escalate into a prolonged conflict, safe-haven demand may rise again, lifting precious metals into a new round of gains; however, if the conflict eases or the US dollar continues to strengthen, precious metals may come under pressure and pull back. In terms of fund flows, the forced deleveraging effect from CME’s previous seven consecutive margin hikes to 18% continues to constrain high-leverage trading, and speculative funds in silver are unlikely to drive wild swings in prices for now. In the domestic spot market, as the spot-futures price spread narrows and tightness in circulating spot cargo supply has eased somewhat, downstream buyers have bargained aggressively. Spot premiums for silver are expected to gradually pull back to normal levels going forward.
